There is a clear, repeatable way to build viable businesses by delivering experiences and outcomes people are willing to pay for with sustainable cost structures. This approach requires intrinsically incentivizing collaboration between financiers and builders to build and nurture profitable, long-term, self-sustaining businesses.
Product / market fit revisited
Product / market fit (PMF) is dead when contextually misused by and for venture backed, digitally native companies. There are many applications where true PMF is alive, well, and essential to establish a viable business.
For any company that has a physical component to their product or service offering PMF is a must have prior to growth. This is because any product or service that requires an in real life (IRL) application or experience has very real, impossible to jeuje foundational cost implications as well as many more not to be ignored opportunities for customer feedback and value network optimization enabling efficient operations.
Let’s define what PMF means in this “grounded in reality” capacity. PMF means:
PMF matters because aligning value to customers who need or want your solution enough to pay for it is the only way to build a revenue positive business. But wait, there’s more - PMF requires the revenue coming from paying customers to more than cover the cost to run the business.
Yes PMF = path to profitability. You see why almost ubiquitous mis-application of the term in the venture craze of the 2010s nearly killed it!
Most venture backed companies never made sense:
For the past two decades, business success was defined by opaque valuations hinged on potential for growth and scale. Financial fundamentals were padded by funding and 10 year company life spans were artificially set by financiers.
VC business building was predicated on the 9 Hype Commandments:
Many a builder has been flummoxed and exhausted by the “big charade” of the venture game. For anyone able to buy into or at least stop logically questioning this paradigm there is some level of cognitive consistency (see: 9 Hype Commandments).
What’s fundamentally unproductive and paradoxical is the relentless, smug, Monday morning quarterbacking (prominent on social media platforms with questionable PMF) suggesting that certain companies, firms, or individual founders / investors have misunderstood or mis-applied the 9 Hype Commandments. It is these people who have ruined the US tech sector. RIP good times.
When we say that one bad apple spoils the barrel, we’re really talking about lagging indicators. The owner of the orchard is not worried about that one apple or even that one barrel. Downstream rotten means upstream rot.
Much of the Silicon Valley-esque ecosystem is the problem and many of the most persistent finger pointers created the game. Now they’re hating on their own acolytes in a bizarre anti-sycophant motion. None of these self-righteous prophet(eer)s have anything to offer by way of alternatives. <Grumble, grumble, throw a stone and slink back to the kool-aid well.>
We have an alternative model to offer.
Talking about the next generation of viable businesses:
A new era of business building is beginning. Some have used the term Silicon Valley Small Business (SVSB) to define this new wave of businesses. While the spirit is willing, the flesh is weak - this term is fundamentally flawed and maybe missing the entire point.
Silicon Valley the place may not be - but Silicon Valley the ideal is dying - first the locals murdered their bank, next it’s each other. Contagion only spreads in systems of the similar.
What the term SVSB gets wrong:
Silicon Valley is a single place with a connotation of spawning big tech, big tech wannabes, and an entire ideology of the billion dollar or bust mentality that has caused much of what is wrong with the currently collapsing US tech sector.
Not moving away from “Silicon Valley” when there is an opportunity is a mistake because it tethers a new universal concept to a single, local geography and an outdated way of thinking and building products, businesses, and companies.
Small business is the right term and now is the moment to re-ground business success in a transparent relationship between revenue and cost.
Building the next generation of viable businesses:
We call this next generation of viable businesses the Modern Small Business - defined as a long-term, profitable, self-sustaining company.
Modern small business building is predicated on the 9 PMF Commandments:
Providing sustainable value that real people will pay for, creates the opportunity for decades of organic company viability. Our approach is the creation of a joint studio + profit sharing fund.
We’re already running a studio that builds businesses through rapid and iterative ideation, research, testing, and learning. Our approach invalidates many ideas early on by focusing on user value and business viability prior to usability and scale. Ideas that move beyond prototyping have established the revenue, market, and cost structures necessary to become profitable, long-term self-sustaining businesses.
The studio model has enabled us to become intimately familiar with the common reasons that companies fail and to build a structure to mitigate and de-risk at these key junctures:
The fund (coming soon!):
The profit sharing structure of the fund inherently aligns founders, investors, and partners in building and nurturing modern small businesses - profitable, long-term self-sustaining businesses.
These incentives start with a clear understanding of and explicit agreement on big picture and financial incentives across all three parties.
Studio + Fund Partners
As long-term builders and operators of our own profitable, self-sustaining business, we see the opportunity to build the next generation of modern small businesses that are technology or technology-enabled and serve a clear unmet need in markets where revenue can grow at a rate to support and eclipse the cost of running the business.
We are currently incubating two early stage modern small businesses in legal tech and data infrastructure.
Reach out if you’d like to learn more!